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Inside Eagle Rock

MLP Overview

A master limited partnership (MLP) is a unique corporate structure which combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. A publicly traded MLP refers to shares of ownership as "units." MLPs return a high percentage of their free cash flows to their investors each quarter via quarterly distributions.

MLPs have become popular in the natural resource, financial services and real estate industries because they are exempt from corporate income tax. The absence of "double taxation" allows an MLP to bid more aggressively for acquisitions and gives MLPs a competitive advantage that may result in significant growth rates.

Distributions from MLPs to investors have certain tax benefits and risks. Potential investors should be certain they understand the tax issues before making an investment in EROC or any MLP. Investors are advised to discuss whether an MLP is an appropriate investment with their personal tax or financial advisor.